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No, you don't owe Delaware $85,165 (but you do owe them something by March 1)

A reminder about the Delaware Franchise Tax & how to calculate it

Author

Ann Marie Guzzi
February 26, 2025

TL;DR

If you’re a Delaware C-Corp, make your filing by March 1. Armed with your cap table, officers/directors list, and your EOY assets, you can knock this out in 15 minutes.

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About the Franchise Tax

Companies that are incorporated in Delaware (aka most venture-backed startups) owe an annual franchise tax to the state. This tax isn’t calculated based on revenue, but rather based on your corporate structure and is based on assets and shares.

The state of Delaware is about to send out tens of thousands of letters notifying corporations that they owe tens of thousands of dollars for this franchise tax - when you receive this letter, don’t panic.

founder, panicking at $85,165 bill

If you are already working with a tax accountant and/or a bookkeeping firm, they’ve likely already handled this for you - congrats for having your financial house in order, you can stop reading this now.

If you aren’t working with an accounting firm:

  1. Read on to learn what needs to happen by March 1

  2. Book time with me so I can gently bully you into getting this figured out

Calculating what you owe

There are two ways Delaware lets corporations calculate their franchise tax:

  1. The Authorized Shares Method. Don’t do this. This is the one that is going to tell you that you owe $85,165 for your 10,000,000 authorized shares, or $170,165 for 20,000,000 authorized shares. This is the default way of calculating.

  2. The Assumed Par-Value Method. This is the one you want. This is based on total assets & issued shares, and will usually wind up having you owe somewhere around $400 to $1,000.

To use the assumed par-value method, you can follow these instructions, or shoot me an e-mail [email protected] and I can share a worksheet on this. You’ll need:

  • Total authorized shares per share class

  • Total issued shares per share class

  • Total gross assets

Filing your annual report & paying franchise tax:

You can file online through Delaware’s site here. You’ll need:

  • Your entity file # (look yourself up here)

  • Your EIN

  • Total number of authorized & issued shares per share class, as of 01/01/2024 (or whenever your company started in 2024) and 12/31/2024.

  • Address for your principal place of business

  • Director and officer names & titles (can use principal place of business for addresses)

  • Banking details to pay your franchise tax

  • The franchise tax calculation from above

Happy filing!

1  and consider carrying a towel

2  an issue I’ll raise to the Delaware State House next time I’m in Wilmington